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finding the alleged actions occurred prior to the statute's repeal; therefore, the circuit court "erred in finding [the plaintiff] lacked" standing under the statute
Summary of this case from RBRC, Inc. v. MassamoreOpinion
NO. 2019-CA-000066-MR
10-18-2019
DEREK E. ORCHARD, SUCCESSOR TRUSTEE OF THE ORCHARD FAMILY TRUST DATED NOVEMBER 19, 1979, TRUST A OF THE ORCHARD FAMILY TRUST, TRUST B OF THE ORCHARD FAMILY TRUST, AND TRUST C OF THE ORCHARD FAMILY TRUST APPELLANT v. WESTERN ENERGY PRODUCTION, LP, A CALIFORNIA LIMITED LIABILITY PARTNERSHIP, FORMERLY KNOWN AS WESTERN ENERGY PRODUCTION, LLC, A NEVADA LIMITED LIABILITY COMPANY; BLACK ROCK FARMS, LLLP; BLACK ROCK THOROUGHBREDS, LLLP; STEVEN MARSHALL; AND SM CAPITAL VENTURES, LLC APPELLEES
BRIEFS FOR APPELLANT: Gregory P. Parsons Marshall R. Hixson Megan K. George Lexington, Kentucky BRIEF FOR APPELLEES: Thomas D. Bullock Lexington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM WOODFORD CIRCUIT COURT
HONORABLE JEREMY MATTOX, JUDGE
ACTION NO. 17-CI-00201 OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE: GOODWINE, TAYLOR, AND K. THOMPSON, JUDGES. GOODWINE, JUDGE: Derek E. Orchard, Successor Trustee of the Orchard Family Trust Dated November 19, 1979, Trust A of the Orchard Family Trust, Trust B of the Orchard Family Trust, and Trust C of the Orchard Family Trust ("Orchard") appeals from a judgment of the Woodford Circuit Court denying his motion for summary judgment and granting the motion to dismiss of Western Energy Production, LP, a California Limited Liability Partnership, formerly known as Western Energy Production, LLC, a Nevada Limited Liability Company; Black Rock Farms, LLLP; Black Rock Thoroughbreds, LLLP; Steven Marshall; and SM Capital Ventures, LLC (collectively "Western Energy"). After careful review, we reverse and remand.
Before filing the underlying action, Orchard obtained judgments against Western Energy Production, LP ("WEP") in two separate but related cases. First, Orchard filed a complaint on May 27, 2014 in the Superior Court of California seeking a judgment against WEP for an outstanding debt. During the pendency of that action, on August 25, 2015, Steven Marshall ("Marshall"), the president of Western Energy Companies ("WEC"), a general partner of WEP, signed documents purporting to transfer WEC's interest in Black Rock Farms, LLLP and Black Rock Thoroughbreds, LLLP (collectively "Black Rock Entities") to himself and then transferred his interest in the Black Rock Entities to SM Capital Ventures, LLC. The transfers were governed by identical agreements of limited partnership, which required any transfer of a limited partnership interest be "duly executed and acknowledged." Marshall signed each of the transfers, but none of them were notarized.
On February 9, 2016, the Superior Court of California entered a judgment of $607,604.77 against WEP. Orchard then filed an action to enforce the foreign judgment in the Fayette Circuit Court. "On October 10, 2016, the Fayette Circuit Court issued a charging order under KRS 362.2-703 in favor of [Orchard] and against [WEP's] interest in Black Rock Entities." R. at 134.
Kentucky Revised Statutes.
On July 19, 2017, Orchard filed the underlying action, requesting a judgment declaring "the transfer of Black Rock Entities void for not complying with the requisite requirements for transfer" and "asserting a fraudulent transfer of Black Rock Entities." Id. In his complaint, Orchard argued the purported transfers of the Black Rock Entities were void because they were not acknowledged as required by the relevant partnership agreements and because they were made with the intent to delay, hinder or defraud Orchard as a creditor of WEP.
Western Energy filed a motion to dismiss, arguing Orchard's claims were governed by the Kentucky Uniform Voidable Transactions Act ("UVTA"), codified in KRS Chapter 378A, and KRS 378A.080(6)(b) provides a "transfer is not voidable . . . [i]f made in the ordinary course of business or financial affairs of the debtor and the insider[.]" Western Energy argued the transfers were valid as they were made in the ordinary course of business.
In Orchard's response to Western Energy's motion to dismiss and motion for summary judgment, Orchard asserted the purported transfers were void because they did not conform to the "restriction on transfer contained in the partnership agreement" under KRS 362.2-702(6). The partnership agreements required the transfer documents to be signed and acknowledged. Marshall signed the purported transfers, but Orchard argued they were not acknowledged. Although the partnership agreements did not define "acknowledged," Orchard argued a document is "acknowledged" when executed in the presence of a notary. The transfer documents were not notarized, so Orchard argued the purported transfers were ineffective. Orchard also argued he had a right to a judgment under KRS 378.010 because the purported transfers were "made with the intent to delay, hinder or defraud creditors" as the transfers would leave Western Energy with essentially no assets to satisfy the California judgment. He further argued KRS 378.010 applied instead of KRS Chapter 378A because KRS 378.010 was in effect when the purported transfers were made.
Repealed on January 1, 2016. --------
On May 30, 2018, the trial court entered an order granting Western Energy's motion to dismiss and denying Orchard's motion for summary judgment. The trial court found the transfer documents had not been acknowledged because they were not notarized. However, the trial court did not rule that the transfers were void. Instead, the trial court held Orchard lacked standing to bring the action because KRS 378.010 was repealed before Orchard filed the action and was no longer good law.
Orchard filed a motion to alter, amend, or vacate the trial court's order, arguing KRS Chapter 378A did not apply to the purported transfers because the statute does not expressly declare it applies retroactively under KRS 446.080(3). He also argued he had standing under KRS 426.381, KRS 418.040, and KRS 362.2-702(6). Finally, Orchard argued he was entitled to summary judgment on his claim that the transfers were void because they were not acknowledged. The trial court denied Orchard's motion on December 12, 2018. This appeal followed.
On appeal, Orchard primarily argues the trial court mistakenly held he lacked statutory standing to bring the underlying claims against Western Energy. He asserts he had statutory standing under KRS 378.010, which was repealed on January 1, 2016, because the purported transfers occurred on August 25, 2015. The trial court held Orchard lacked standing because KRS 378.010 "was repealed prior to the filing of this action." R. at 146. The question at issue involves application of a statute, which "is a matter of law and may be reviewed de novo." Bob Hook Chevrolet Isuzu, Inc. v. Commonwealth, Transp. Cabinet, 983 S.W.2d 488, 490 (Ky. 1998).
On January 1, 2016, the UVTA, codified in KRS Chapter 378A, replaced KRS Chapter 378. However, the UVTA does not contain retroactivity language. KRS 446.080(3) provides: "No statute shall be construed to be retroactive, unless expressly so declared." "Kentucky law prohibits the amended version of a statute from being applied retroactively to events which occurred prior to the effective date of the amendment unless the amendment expressly provides for retroactive application." Commonwealth, Dept. of Agriculture v. Vinson, 30 S.W.3d 162, 168 (Ky. 2000) (citing KRS 446.080(3); Kentucky Industrial Utility Customers, Inc. v. Kentucky Utilities Company, 983 S.W.2d 493 (Ky. 1998)). Furthermore, the United States Bankruptcy Court for the Eastern District of Kentucky held the "UVTA does not state that it is retroactive. Therefore, any transfer occurring prior to its enactment . . . must be considered under the repealed chapter 378, which was in effect at the time of the pertinent transfers." In re Licking River Mining, LLC v. Monday Coal, LLC, 571 B.R. 241, 245 n.3 (Bankr. E.D. Ky. 2017). The transfers at issue occurred on August 25, 2015. We hold the trial court erred in finding Orchard lacked statutory standing under KRS 378.010 and direct the trial court to apply KRS 378.010 on remand.
Orchard also argues he had standing to bring the underlying action under KRS 426.381, KRS 418.040, and KRS 362.2-702(6). The trial court's order only addresses standing under KRS 378.010, and it is unclear whether Orchard raised these arguments before the motion to alter, amend, or vacate. "A party cannot invoke CR 59.05 to raise arguments and to introduce evidence that should have been presented during the proceedings before the entry of the judgment." Gullion v. Gullion, 163 S.W.3d 888, 893 (Ky. 2005). "[W]ithout a ruling of the lower court on the record regarding a matter, appellate review of that matter is virtually impossible." Jewell v. City of Bardstown, 260 S.W.3d 348, 351 (Ky. App. 2008). Because the trial court did not rule on these additional statutory standing arguments, we cannot address them on appeal.
Finally, Orchard argues he was entitled to summary judgment on Count I of his complaint, which seeks a judgment declaring the purported transfers were void because the trial court found the purported transfers were not acknowledged by notarization as required by the relevant partnership agreements. Although the trial court found the transfer documents failed to adhere to the partnership agreements' requirements, it did not expressly find the purported transfers were void. Instead, the trial court's opinion abruptly shifts to a brief discussion of Orchard's lack of standing because KRS 378.010 had been repealed. As such, because the trial court did not rule directly on this issue, we cannot address it on appeal.
CONCLUSION
For the foregoing reasons, we reverse the judgment of the Woodford Circuit Court and remand for further proceedings consistent with this opinion.
ALL CONCUR. BRIEFS FOR APPELLANT: Gregory P. Parsons
Marshall R. Hixson
Megan K. George
Lexington, Kentucky BRIEF FOR APPELLEES: Thomas D. Bullock
Lexington, Kentucky